Avoid penalties and taxes by having the check made to your new IRA administrator rather than to you. By Kimberly Lankford, Contributing Editor December 19, 2006 I retired last month, and I think I made a mistake when I elected to withdraw my 401(k) money. When I received the check, it had 20% withholding taken from it. I had planned to open an IRA and transfer the total into it. My brokers said that if I opened a new IRA and deposited the total amount of the withdrawal by making up the tax withheld, I can claim the withheld taxes and recover the money when I file my taxes. Is this true? Your broker is right. You won't be hit with a penalty or tax bill as long as you deposit the money into an IRA within 60 days. In that case, you can recover the taxes that had been withheld when you file your tax return. But there is a big hitch, as you mention. Because your company withheld 20% for taxes, you actually have to come up with the cash to make up the difference when you make the IRA deposit. Otherwise, you're rolling over only 80% of the money, and the rest will be subject to an early-withdrawal penalty. You could have avoided this problem by making a direct transfer to your new IRA administrator rather than having the check made out to you. That way, the money never touches your hands and won't be subject to the 20% withholding. The company that administers the new IRA is generally more than happy to help with the paperwork so it can get the money as easily as possible. Got a question? Ask Kim at email@example.com.